Accounting information systems controls and process 2nd tunnwe weickgenannt chapter 02

Prepared by
Coby Harmon
University of California, Santa Barbara
Westmont College
Chapter
2-1


Foundational
Concepts of the AIS
Chapter
2-2

Accounting Information Systems, 2nd Edition


Study
Study Objectives
Objectives
1.

The interrelationships of business processes and the AIS

2.

Types of accounting information systems

3.

Client-server computing

4.

Cloud computing

5.

Accounting software market segments

6.

Input methods used in business processes

7.

The processing of accounting data

8.

Outputs from the AIS related to business processes

9.

Documenting processes and systems

10.

Ethical considerations at the foundation of accounting information
systems

Chapter

2-3


Business
Business Processes
Processes and
and the
the AIS
AIS
Accounting Information System - a system that captures,
records, processes, and reports accounting information.

Business Process - a prescribed sequence of work steps
completed in order to produce a desired result.

Chapter
2-4

SO 1 The interrelationships of business processes and the AIS


Business
Business
Processes
Processes
and
and the
the AIS
AIS

Exhibit 2-1
Overall View of Transactions,
Processes, and Resulting Reports

Chapter
2-5

SO 1 The interrelationships of business
processes and the AIS


Business
Business Processes
Processes and
and the
the AIS
AIS
Question
1. Which of the following statements is not true?
a. Accounting information systems must maintain both detail
and summary information.
b. Business processes may vary from company to company.
c. Regardless of the extent of computerization, all accounting
information systems must capture data from the
transactions within business processes.
d. Business processes categorized as expenditure processes
are not intended to be processes that serve customers.
Chapter
2-6

SO 1 The interrelationships of business processes and the AIS


Types
Types of
of Accounting
Accounting Information
Information Systems
Systems
Three categories of AIS:
1. Manual systems
2. Legacy systems
3. Modern, integrated IT systems

Chapter
2-7

SO 2 Types of accounting information systems


Types
Types of
of Accounting
Accounting Information
Information Systems
Systems
Manual Systems
Generally used by small organizations. Entirely manual
system would require:

Chapter
2-8

 Source document

 General journal

 Turnaround document

 Special journals

 General ledger

 Subsidiary ledgers

SO 2 Types of accounting information systems


Types
Types of
of Accounting
Accounting Information
Information Systems
Systems
Legacy Systems
Existing system, often based on old technology.
Advantages are that legacy systems:
1. Customized to specific needs.
2. Support unique business processes not inherent in generic
accounting software.

3. Contain invaluable historical data that may be difficult to
integrate into a new system.
4. Well supported and understood by existing personnel.
Chapter
2-9

SO 2 Types of accounting information systems


Types
Types of
of Accounting
Accounting Information
Information Systems
Systems
Legacy Systems
Disadvantages are that legacy systems:
1. Costly to maintain.
2. Often lack adequate supporting documentation.
3. Hardware needed to maintain may become obsolete.
4. Not usually based on user-friendly interfaces.
5. Tends to use software written in older computer languages.
6. Often difficult to modify to make user friendly.
7. Difficult to integrate when companies merge.
Chapter
2-10

SO 2 Types of accounting information systems

Types
Types of
of Accounting
Accounting Information
Information Systems
Systems
Legacy Systems
Decision whether to replace or update legacy systems.
1. Screen scrapers
2. Enterprise application integration
3. Complete replacement of legacy systems

Chapter
2-11

SO 2 Types of accounting information systems


Types
Types of
of Accounting
Accounting Information
Information Systems
Systems
Modern, Integrated Systems
New programs sold by software development companies are
more user friendly than legacy accounting systems.
Advantages to purchasing accounting software:
1. Lower cost
2. Shorter implementation time

3. Fewer bugs

Chapter
2-12

SO 2 Types of accounting information systems


Types
Types of
of Accounting
Accounting Information
Information Systems
Systems
Question
In a manual system, an adjusting entry would most likely be
initially recorded in a
a. special journal.
b. subsidiary ledger.
c. general journal.
d. general ledger.

Chapter
2-13

SO 2 Types of accounting information systems


Types
Types of

of Accounting
Accounting Information
Information Systems
Systems
Question
Which of the following is not a disadvantage of maintaining legacy
systems?
a. There are fewer programmers available to support and
maintain legacy systems.
b. They contain invaluable historical data that may be difficult
to integrate into newer systems.
c. Hardware or hardware parts may be unavailable for legacy
systems.
d. It can be difficult to integrate various legacy systems into an
integrated whole.
Chapter
2-14

SO 2 Types of accounting information systems


Types
Types of
of Accounting
Accounting Information
Information Systems
Systems
Question
Which of the following is a disadvantage of purchased
accounting software, compared with software developed inhouse?

a. It is custom designed for that company.
b. It is less costly.
c. The implementation time is shorter.
d. There are fewer bugs.
Chapter
2-15

SO 2 Types of accounting information systems


Client–Server
Client–Server Computing
Computing
Two types of computers are networked together to
accomplish the application processing.
Characteristics:
1. Client and server computer are networked together.
2. System appears to users to be one integrated whole.
3. Individual parts of processing are shared between server
and client.
4. Client computer participates in processing or data
manipulation in some meaningful way.
Chapter
2-16

SO 3 Client-server computing


Client–Server
Client–Server Computing

Computing
Two Levels of Client-Server Computing:
1. Distributed presentation.
2. Distributed applications.

Chapter
2-17

SO 3 Client-server computing


Cloud
Cloud Computing
Computing
Recently, there has been a movement away from a client-server
approach toward cloud computing. It includes:
► Software and data reside with third party companies (the cloud)

and not on company computers.
► Outsourcing of IT to a third party.

Advantages:

Chapter
2-18

1. Scalability

3.

Infrastructure is reduced

2. Expanded access

4.

Cost savings

SO 4 Cloud computing


Cloud
Cloud
Computing
Computing

Exhibit 2–2
Cloud Hosting of Accounting
Software

Chapter
2-19

SO 4 Cloud computing


The
The Real
Real World
World

Thomas Kemper Soda Company of Portland, Oregon, is a small-batch craft-brewer
of root beer, ginger ale, and other natural soft drinks sold in the western United
States. After years of struggling with communication and information sharing
between the members of its mobile workforce, the company recently began
subscribing to cloud based Microsoft Office 365. Significant improvements were
realized very quickly. Rather than depending upon e-mail for sharing information
and documentation, management at Thomas Kemper began accessing its file-share
server through the cloud. They saved time; obtained better, more secure and up-todate information; and were therefore able to work together more effectively. Cloudbased conferencing, e-mailing, calendaring, and screen-sharing all make it possible
for the employees to stay connected despite their various physical locations. In
addition, the company’s management team estimates that 40 hours of employee
productivity are gained each week due to communication efficiencies, six hours are
saved each week on technology support, and thousands of dollars of expenses
have been avoided, including over $10,000 of hardware upgrade costs.
Chapter
2-20

SO 4 Cloud computing


Accounting
Accounting
Software
Software
Market
Market
Segments
Segments

Exhibit 2-2
Accounting Software Market

Segments and Movement in
the Market

Chapter
2-21

SO 5 Accounting software market segments


Accounting
Accounting Software
Software Market
Market Segments
Segments

Exhibit 2-3
Popular Accounting Software Programs within
the Market Segments
Chapter
2-22

SO 5 Accounting software market segments


Accounting
Accounting Software
Software Market
Market Segments
Segments
Question

Which of the following is not a method of updating legacy
systems?
a. Enterprise application integration.
b. Backoffice ware.
c. Screen scraper.
d. Complete replacement.

Chapter
2-23

SO 5 Accounting software market segments


Accounting
Accounting Software
Software Market
Market Segments
Segments
Question
When categorizing the accounting software market, a
company with revenue of $8 million would most likely
purchase software from which segment?
a. Small company.
b. Midmarket.
c. Beginning ERP.
d. Tier 1 ERP.
Chapter
2-24

SO 5 Accounting software market segments

Input
Input Methods
Methods Use
Use In
In Business
Business Processes
Processes
Input methods used in organizations:
► Source Documents and Keying
► Bar Codes
► Point of Sale Systems
► Electronic Data Interchange (EDI)
► E-Business and E-Commerce

Chapter
2-25

SO 6 Input methods used in business processes